The Federal Reserve Board's proposed overdraft-fee rule generated the predicted storm of interest. Banks may soon have to seek permission before enrolling a customer in an overdraft fee program or something very similar. There is as much smoke as actual fire, here. More than 85 percent of banks already offer an opt-out, according to Moebs Services. 

Still, some banks are talking about rather draconian solutions. TCF Financial, the third-largest bank in Minnesota, relies more on overdraft fees than most others, Nearly 20 percent of the bank's revenue comes from overdraft fees, estimate analysts at JPMorgan Chase. In 2009, that will likely amount to about $200 million.  

If any new rule really does threaten to crimp revenues, the bank's CEO has said that it could simply charge monthly maintenance fees for all checking accounts, essentially ending the "free checking" program, but he doesn't think it will get to that. He argues "the technology doesn't yet exist to notify debit card customers when their accounts are about to be overdrawn. And even if it did, retailers and banks wouldn't want it, according to an article in the Minneapolis Star Tribune. "The merchants don't want that, the customers don't want it and the banks don't want it," he was quoted as saying. 

Hoping that the new rule is never passed may not be the best solution. The tide in favor of some sort of reform measure is strong. CNNMoney captures the tone of the reporting in an article noting that banks in the United States are poised to make $38.5 billion in customer overdraft fees this year. It also quickly points out that "a large portion of the revenue is likely to come from the most financially stretched consumers." 

One course of action for the industry would be to highlight the technologies that might help consumers avoid overdraft fee situations. The technology is certainly there, though it might require a proactive attitude on the part of consumers. 

Still, in this era of regulatory posturing, it might be in the best interests of banks to go ahead and start highlighting the ways they can actually help consumers. Digging in against your customers is exactly what you don't want right now. The argument that people actually want overdraft fees and appreciate the charge is almost risible now. 

At PNC Bank, where overdraft fees range between $31 and $35 per transaction, PR reps have noted that there are also services to help customers avoid overdraft situations. The "Virtual Wallet" online financial tool was recently featured in a local article. It features tools that will alert you of a tough situation. "The system will keep an eye on the account; students have the opportunity for their parents to monitor their account and to transfer in funds," a spokesman told the paper. "There is a 'danger days' feature whereby it flags you when you are at risk of going over. If the gas bill is due and it's $180, and you have $160 in the account, it will flag you." 

This is not the whole answer to the problem, but technology can be part of the solution. - Jim